Energy Company of Canada (TSX:POW) is a holding firm that has endured a conglomerate low cost for years, but continues to generate respectable shareholder returns by means of rising dividends and common share repurchases. Passive income-oriented buyers might load up on POW inventory, earn a 5.2% dividend yield, take part within the Canadian dividend aristocrat’s progress plans, and luxuriate in some capital beneficial properties because the holding firm grows its internet asset worth.
Energy Company of Canada is a $25.6 billion Canadian monetary providers powerhouse that holds controlling stakes in Canada’s largest non-bank asset supervisor IGM Monetary, a controlling curiosity in insurance coverage conglomerate Nice-West Life, and two massive different investing outfits whereas holding onto a dividend-earning funding in Groupe Bruxelles Lambert (GBL) – a European holding firm that lately raised dividend payouts by 80% for 2025.
Since Energy Company’s reorganization was introduced in December 2019, the corporate has vastly refocused its mandate on monetary providers, improved working efficiencies for its holding firms, raised dividends by 38.9%, generated an 86% complete return for shareholders over the previous 5 years, and been repurchasing its excellent shares constantly over the previous 4 years.
Nevertheless, POW inventory’s adjusted internet asset worth per share was $50.24 on August 8, 2024 whereas shares traded at costs below $37 that day. Though the inventory has since gained bids above $42 at writing, the valuation low cost nonetheless stays.
Dividend dynamo: Why POW inventory shines for earnings seekers
Energy Company inventory is a confirmed dividend aristocrat that has raised dividends for 9 consecutive years now and averaged a 7.9% dividend progress price over the previous three years. The dividend, which yields 5.2% yearly, is properly coated by recurring earnings given a 50.5% payout ratio.
Given its sustained free money movement era, POW inventory might proceed enhancing investor returns by means of dividend raises and inventory repurchases. Share repurchases have been ongoing for 4 years now. Energy Company decreased excellent shares by 3.5% over the previous 4 years and will proceed on this accretive path so long as the deep low cost on POW inventory’s internet asset worth continues available on the market. The corporate repurchased $189 million price of its shares in the course of the first half of this yr.
Share buybacks imply the corporate’s remaining shareholders will earn increased dividends per share from investees every year, and administration might cross these onto shareholders.
Unlocking progress: Energy Company of Canada inventory’s path to future success
Digital transformation opens up alternatives for product menu expansions in wealth administration as the corporate scales up its choices. The largest alternative lies in the USA for Nice-West Life by means of Empower. The US market ought to drive progress over the following three to 5 years. The corporate already has digital relationships with 18 million Individuals and plenty of services and products to supply them.
Administration is assured in sustaining the robust returns achieved over the previous 5 years, specializing in execution and earnings progress. The corporate has raised substantial capital in different asset administration companies and is actively in search of strategic acquisitions to drive progress.
If inflation has been defeated and rates of interest come again down once more, particular person financial savings could start to enhance as stress eases on wallets. This might profit Energy Company’s wealth administration and insurance coverage companies, significantly as they deal with the rising want for longevity threat options within the face of declining outlined profit pension plans.
Valuation verdict: Is POW inventory a cut price purchase?
Energy Company inventory appears to be like low-cost with a historic price-to-earnings (P/E) a number of of 10, a ahead P/E of 8.8, and a ahead price-earnings-to-growth (PEG) ratio of 0.7, which means shares could possibly be undervalued given the corporate’s earnings progress potential. In line with investing legend Peter Lynch, PEG ratios lower than 1.Zero point out potential undervaluation as buyers underappreciate the inventory’s long-term earnings progress potential.
Whereas the corporate faces challenges similar to ongoing charge stress in wealth administration and rising regulatory prices, administration believes they’re well-positioned to handle these points by means of scale, operational effectivity enhancements, and potential trade consolidation.
Investor takeaway
POW inventory gives a horny alternative for dividend-focused buyers, with its compelling valuation, robust dividend profile, and a number of progress avenues. Energy Company of Canada’s various portfolio and strategic give attention to monetary providers place it properly for future success. That stated, your funding’s efficiency nonetheless wants assist from secure and rising economies.